Argentina has started talks with the International Monetary Fund on a new loan program that could provide more money for the country to fight triple-digit inflation and slash the fiscal deficit, Economy Minister Luis Caputo said on Tuesday.
The IMF “is willing to lend more money,” he said at the AmCham Summit 2024 in Buenos Aires.
Conversations have just started as part of negotiations for a new loan program, he added. Other funding sources are also being considered, the minister said.
The fresh funds would help the government to remove currency controls, a key for reducing 254% annual inflation and rekindling economic growth, Caputo suggested.
On Monday, Argentine President Javier Milei said in a video interview with LN+ that increasing international reserves by $15 billion would make it possible to end the currency controls. That lead to speculation that a deal with the IMF or another lender could involve that much money.
A new deployment of funds could come from the IMF “or from somewhere else,” Caputo said.
“With the IMF we are just beginning to talk about an eventual new program, but it is an issue that is still premature,” he added. “The IMF is open to a new program … and, if it is reasonable, they could provide some more money.”
FINANCIAL CRISIS
Argentina arranged a $44 billion loan from the IMF in 2018 and extended it in 2020 to mature in September 2024.
Despite the huge bailout, the country has still struggled to emerge from a financial crisis that has left it without access to the international markets following a default on some $100 billion in bonds.
With large external debt payments starting to come due this year, a default is widely expected. To avert this, Milei and Caputo are slashing public spending in a bid to turn the primary fiscal account from a 5% of GDP deficit in 2023 to a 2% surplus this year, helping in the process to rebuild international reserves.
This would reduce the need for the government to borrow from the central bank, a process that leads to printing pesos and is a key driver of currency depreciation and inflation. Milei has set a target of accumulating $10 billion this year, in line with commitments under its current loan program with the IMF.
Achieving a fiscal surplus and increasing international reserves, however, is full of challenges, Caputo said.
“The goal is to lower inflation so that we can stabilize [the economy] so that it can grow, and we can achieve a fiscal surplus so that we can begin to cut taxes,” he said. “We are never going to change our direction to achieve a fiscal and monetary balance.”